Help, I'm Rich!

Your Compass to a Value-Adding Private Banking Experience

Kees Stoute

• Publisher: Wiley
• Year: 2014
• Print ISBN: 9781119020547
• eBook ISBN: 9781119020554
• Edition: 1
• Topic: Economics
• Subtopic: Banks & Banking
• Index: Economics

Manage and protect your wealth with the help of a private bank

Help! I'm Rich! is a detailed examination of how private banking services can help high net worth individuals take charge over their wealth and protect their assets. Designed to increase the ability to discern between 'adding value' and 'self-orientation' and thus improve the professional relationship between private bankers and clients, this reader-friendly guide explains the concerns that typically come along with wealth, and the various ways in which private banks can help clients deal with these challenges effectively. You will learn what private banks do, which services they offer, and how to find and approach a private bank. Case studies illustrate the various scenarios presented, and graphs, tables, cartoons and diagrams help facilitate a true understanding of what private banks can do for you. A detailed description of the various asset classes explains the reasons for — and risks of — investing at each level, giving you a better idea of the wealth management methods that have proven effective for others in your class.

Whether you are new to wealth or are newly tasked with the money management aspect of it, it's vital for you to understand the ways in which your high net worth changes the game. This book is an indispensable guide to understanding the common challenges of the wealthy, and the crucial role private banks play in dealing with these challenges.

• Understand the challenges wealth brings to money management
• Discover how private banks can help address specific concerns
• Learn the questions you should ask your private banker
• Make better financial decisions by having an expert in your corner

The more money you have, the more attention it requires, and the solutions tend to get more complicated. The support of a professional services provider seems not only unavoidable but highly desirable. Help! I'm Rich! shows you how to gain the most out of your private banking experience, with detailed guidance and expert advice.

Part One
INTRODUCTION

Help, I’m Rich! You might claim that this title does not seem to make much sense. Having money means being more independent. Being more independent means that you don’t need to rely on others. So why send such an SOS to the world when you are rich?

As many rich individuals can testify, being rich comes with challenges—challenges that are very much related to and often caused by the very fact that you are rich. As most of these challenges are not unique, it makes a lot of sense to benefit from the good and bad experiences of other people who are in a similar situation.

Private banking is the industry that collates these experiences and as such has become specialized in helping the rich to address these many typically wealth-related challenges and concerns. However, for this industry to be able to deliver its value-adding potential, there has to be a firm trust base, and that is precisely what seems to be lacking to a large extent.

Apart from highlighting why and how private banks should add value to the life of the rich, in this introductory part of the book we elaborate on trust as well as on ways to develop trust. If you understand our view on how trust in the private banking industry can be developed, you also understand why this book has been written.

Chapter 1
Toward a Trusted and Value-Adding Private Banking Industry

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Client skepticism toward the financial sector has reached an all-time high, while morale in the private banking industry has reached an all-time low. That has made it more difficult than ever for the private banking industry to offer a truly value-adding service.

As the rich are supposed to be the main beneficiaries of the impressive knowledge and professionalism in the industry, it is of the utmost importance that faith in the industry be restored quickly.

Regulators and banks are working hard to do their part to increase credibility. However, clients also need to play an important role as they stand to gain the most from a well-respected, professionally functioning private banking industry. By proactively increasing their knowledge of the typical private banking service offering, they will understand much better what to expect and therefore will be better prepared to deal with a private bank in such a manner that they can get the most out of the relationship.

The areas of expertise where private banks typically add value are:

• Investments
• Credit
• Life insurance
• Wealth structuring
• Psychology of wealth

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“Only three more levels, and I am done.” Thirteen-year-old Tom is playing his favorite computer game. For the past two months he steadily worked his way up from level 1 to level 22. The game ends when the player successfully completes all 25 levels. Tom is excited. He is so close. None of his friends has yet reached this far. Imagine how cool it would be to reach the last and final level.

Two weeks later, Tom achieves the impossible. He is now officially a master of the game. With some smart moves and a healthy dose of logical thinking, he has conquered level 25. He feels proud of himself, and experiences a euphoric high.

Another week later, Tom feels a bit down. By successfully finishing his game, he effectively lost his favorite pastime. His feelings of pride and euphoria have given way to a sense of emptiness. The immense satisfaction of being the “King of the Game” lasted a remarkably short time. What can he do now?

This paradox of achieving a dream, followed by the realization that normal life then returns, is like a sobering hangover. Achieving a dream does not grant you eternal access to a dreamlike world. Instead, the bitter truth is that by achieving your dream you lose a source of inspiration.

Becoming wealthy is another such dream. To become financially independent and be able to do whatever you like appears to be a commonly shared goal. The entire lottery industry, for example, is built on this premise. But then, when one day your dream comes true, life goes on. More often than not we see how gradually the euphoria of financial success gives way to serious wealth-related concerns, worries, and even anxieties, such as:

• The fear of losing money by (over)spending, paying taxes, making the wrong investments, divorce, and so forth
• Being sure of having enough money to financially support you for the rest of your life
• The fear of looking or feeling stupid by missing out on obvious investment opportunities
• Transferring wealth and the business to the next generation
• Being able to raise kids in a way that they are inspired to live a purposeful life and are motivated to excel
• How to protect and keep up the reputation that has come with the wealth
• How to distinguish between real, sincere friends and phonies
• How to go about achieving philanthropic goals, being involved in charity in a “right” way, and making sure every dollar has the greatest impact
• Maintaining maximum privacy so as to avoid feeling uncomfortable when too many people know about this financial situation
• Theft, robberies, blackmail, kidnappings—the rich being obvious targets

Dealing with these and similarly difficult concerns is a consequence of being rich. To really enjoy your wealth and lead a happy, fulfilling life it is first and foremost important to make yourself aware of the concerns, worries, and anxieties that, generally speaking, come with wealth. And you will need to address the causes of the concerns, worries, and anxieties that keep you restless.

That is easier said than done. Fortunately, there is an industry specializing in addressing your wealth-related concerns: private banking.¹

Over the years the private banking industry has built tremendous knowledge on every aspect of managing wealth. Based on experience with thousands of other rich families, it has the knowledge to help you protect, grow, share, transfer, and enjoy your wealth. Problem solved: For most of our wealth-related concerns, worries, and anxieties, there are private banking professionals to help you cope. They can help you to continue to live your dreams.

Or not: Haven’t we learned from the financial crisis in 2008 and its aftermath that private bankers are nothing but “wolves in sheep’s clothing”? To what extent can I genuinely trust that my private banker will help me to cope with my wealth-related challenges?

Shaken Confidence

The financial crisis has been explained by many critics: Encouraged by technological developments radically shifting the paradigm of efficiency and scalability, by a continuously increasing competitive environment, by a global trend to focus on profitability and short-term shareholder value, and by excessive bonus pay structures, the interests of clients gradually moved to the background, and in their place, unwarranted, irresponsible risks were taken instead. As a result, the entire financial system was on the brink of collapse.

It is not our intention in this book to explain the crisis. A lot has been said and written already. What is important to us is what the crisis meant for the clients of private banks.

Instead of the private bank being the safe harbor, the place to address the various concerns of HNWIs, the sector seemed to turn into a source of even more concerns and anxieties. How sure can you be that your bank has the ability to survive? How much can you rely on the advice of your private bankers? Are their recommendations serving their interests or yours?

We all know the stories. Take Mr. Melvin Connaly. In 2005, at age 68, he sold his company. He made US$3.5 million from the sale. He invested most of this money with his private bank. The bank then invested this in options and futures. The bank encouraged him to take a loan to be able to invest even more in these financial instruments. Mr. Connaly ...

Table of contents

• Cover
• Title Page
• Copyright
• Foreword
• Acknowledgments
• About the Author
• Part One: Introduction
• Part Two: Investments
• Part Three: Credit
• Part Four: Life Insurance
• Part Five: Wealth Structuring
• Part Six: Psychology of Wealth
• Epilogue
• Appendix
• Index
• End User License Agreement